Texas
Last Updated: March 2020
For the complete text of Texas statutes please refer to theTexas Property Tax Code, other property tax information can be found at the Texas Comptroller of Public Accounts.
Property Classification:
Generally, Texas does not assign different types of property to different classes for property tax purposes. Texas law does provide preferential property tax treatment for forest and open-space lands that fall within the following categories:
1. open-space land devoted to agriculture;
2. land restricted to recreational, park, or scenic use;
3. open-space land devoted to timber production; and
4. open-space land devoted to wildlife management use.
Landowners may apply for special appraisal based on their land's productivity value rather than what the land would sell for on the open market. Typically, a productivity value is lower than market value, which lowers property taxes. Open-space land devoted to timber production is entitled to taxation on the basis of its productive capacity.
There is no minimum acreage requirement for property to qualify for present-use valuation as timberland.
Land qualifies for appraisal as timberland if it: (Texas Tax Code § 23.72)
(1) is currently and actively devoted principally to production of timber or forest products to the degree of intensity generally accepted in the area with intent to produce income, and (2) has been devoted principally for five of the preceding seven years to the production of timber or forest products or to agricultural use that would qualify it for appraisal as open-space or agricultural use land.
The chief appraiser may use expense receipts, canceled checks, or current accounts of expenses, labor, and revenues to determine if the owner has expenses directly related to timber production. An owner seeking to produce income usually will keep these types of records.
Some examples of evidence of intent to produce income are:
• Receipt of revenues through sale of timber;
• Letters or other documents showing that the owner has attempted to sell the timber;
• A contract of sale;
• Receipts, canceled checks, and other evidence that the owner has had expenses or income related to the timberlands use;
• Investments in improvements to enhance the value of the existing timber;
• Purchase of easements to allow loggers access to land-locked tracts;
• Investments in substantial amounts of reforestation or smaller amounts if other parts of the tract are already in commercial timber;
• Attempts to salvage timber that has value but that is damaged or dead;
• Using a consulting forester to help manage the land;
• Hiring someone to conduct a timber sale; and
• Seeking recommendations of a public forester before making a timber sale.
The absence of visible physical timber activities on the land does not mean that the land is not currently and actively devoted to timber production. The chief appraiser should look for other indications of current and active devotion. The following are some indications of current, active devotion.
• Timber activity records. Is the owner able to produce records showing timber management activity? Some records that indicate timber management activity are documents showing timber has been harvested, canceled checks for services, contracts of sale, and land leases.
• Forest Management Plan. The owner operates under a current, written forest management plan. A forest management plan must be developed for the present time. An outdated plan is of no use as a management document. The plan also should be in writing and signed by the individual who prepared it.
However, the existence of a current management plan does not always mean the owner is following the plan. The owner should be able to show that he or she is using or intends to use the plan for timber production.
Knowledgeable timberland owners may prepare their own plans. If the owner of a marginal tract cannot afford a privately developed forest management plan, is on a waiting list to have a plan developed by a public agency, or lacks the expertise to develop his or her own plan, the chief appraiser should look for other evidence of current and active devotion.
• Timber cost-sharing programs. The owner receives Texas Reforestation Foundation (TRe), Environmental Quality Incentive Program (EQIP), Conservation Reserve Program (CRP) or Forest Land Enhancement Program (FLEP) cost sharing funds for reforestation and timber stand improvement. The Texas Forest Service coordinates the federal EQIP, CRP, and FLEP programs. TRe is a privately funded cost-sharing program administered jointly by the Texas Forest Service and the Texas Forest Association.
• Efforts to sell timber. The owner has letters or other documents showing efforts to sell the timber.
• Salvage activity. The owner has documentation showing that he or she has attempted to salvage damaged or dead timber that continues to have value.
• Certified tree farm. A certified tree farm is privately owned, protected, and managed timberland. Timberland must meet standards adopted by the American Forest Foundation for certification. Standards include management for sustainable forests and timely reforestation with desirable species. A certified tree farm is inspected by professional foresters before it may qualify for the program and is periodically re-inspected. Most certified tree farms are easily recognized by the green diamond-shaped "TREE FARM" marker placed in front of the property.
• Memberships in associations. The owner is a member of one of the following: the Texas Forestry Association; a county or local timber growers association; or a county or local timberland owners association.
• Assistance programs. Does the owner participate in a forest industry landowner assistance program? Many firms in the forest products and the pulp and paper industry have entered into agreements with private timberland owners to manage their timber in exchange for first chance to buy the timber when it is ready to harvest.
• Participation in forestry extension activities. The owner participates in forestry extension activities. The Texas Cooperative Extension offers periodic programs for timberland owners. They also offer online courses through their Cooperative Extension Curriculum Project.
• Consulting foresters.
Land is not eligible for appraisal as timberland if: (Texas Tax Code § 23.77)
(1) the land is located inside the corporate limits of an incorporated city or town, unless:
(A) the city or town is not providing the land with governmental and proprietary services substantially equivalent in standard and scope to those services it provides in other parts of the city or town with similar topography, land utilization, and population density; or
(B) the land has been devoted principally to production of timber or forest products continuously for the preceding five years;
(2) the land is owned by an individual who is a nonresident alien or by a foreign government if that individual or government is required by federal law or by rule adopted pursuant to federal law to register his ownership or acquisition of that property; or
(3) the land is owned by a corporation, partnership, trust, or other legal entity if the entity is required by federal law or by rule adopted pursuant to federal law to register its ownership or acquisition of that land and a nonresident alien or a foreign government or any combination of nonresident aliens and foreign governments own a majority interest in the entity. or
Application: (Texas Tax Code § 23.75)
A person claiming that his land is eligible for appraisal as timberland must file an application with the chief appraiser on a form provided by the appraisal office and prescribed by the Comptroller, and contain the information necessary to determine the validity of the claim. The form must be filed before May 1st. However, for good cause the chief appraiser may extend the ?ling deadline for not more than 60 days.
The chief appraiser shall accept and approve or deny an application for appraisal under this subchapter after the deadline for ?ling it has passed if it is ?led before approval of the appraisal records by the appraisal review board. If the appraisal is approved when the application is ?led late, the owner is liable for a penalty of 10 percent of the difference between the amount of tax imposed on the property and the amount that would be imposed if the property were taxed at market value. The chief appraiser shall make an entry on the appraisal records indicating the persons liability for the penalty and shall deliver written notice of imposition of the penalty, explaining the reason for its imposition, to the person. The penalty will be added to the owners tax bill, and the tax collector for the unit shall collect the penalty at the time and in the manner he collects the tax. The amount of the penalty constitutes a lien against the property against which the penalty is imposed, as if it were a tax, and accrues penalty and interest in the same manner as a delinquent tax.
If a person fails to file a valid application on time, the land is ineligible for appraisal for that year. Once an application is filed and appraisal as timberland is allowed, the land is eligible for appraisal in subsequent years without a new application unless the ownership of the land changes or its eligibility ends.
Change in Use of Land: (Texas Tax Code § 23.76)
If the use of land that has been appraised as timberland changes, an additional tax is imposed on the land equal to the difference between the taxes imposed on the land for each of the five years preceding the year in which the change of use occurs and the tax that would have been imposed had the land been taxed on the basis of market value in each of those years, plus interest at an annual rate of 7% calculated from the dates on which the differences would have become due.
If the change of use applies to only part of a parcel that has been appraised as timberland the additional tax applies only to that part of the parcel and equals the difference between the taxes imposed on that part of the parcel and the taxes that would have been imposed had that part been taxed on the basis of market value.
Special Circumstances:
Appraisal as restricted use timber land - Timber land on which 1) harvesting is restricted for aesthetic, conservation, water protection, or plant or animal protection; or 2) timber is harvested and regenerated by natural regeneration or planting may qualify for appraisal for Texas property tax purposes as restricted-use timber land (Texas Tax Code § 23.9801).
For special forest zones, the land must be in an aesthetic management zone, critical wildlife habitat zone, or streamside management zone. The appraised value is one-half of what it would have been appraised at under normal circumstances. The appraised value may not exceed the lesser of the market value of the land or the appraised value of the land in the year preceding the first year it is appraised as restricted use timber land. An application must be filed with the chief appraiser by May 1. If use of the timber land changes so that it no longer qualifies as restricted-use timber land, an additional tax equal to what the land would have been assessed at will be imposed including interest.
Open-space land converted to timber production - If land that has been appraised as open-space land for at least five years is converted after September 1, 1997, to the production of timber, the owner may elect to continue having the land appraised as open-space land under Subchapter D for 15 years after the conversion, so long as the land qualifies during that period for appraisal as timberland. (Texas Tax Code § 23.59).
Timber use convert to wildlife management uses - Qualified timberland can be converted to wildlife management use directly. The land will be appraised at the same category before the conversion.
Valuation and Assessment:
The appraisal process for timberland: (Texas Tax Code § 23.72; Manual for the Appraisal of Timberland, Comptroller of Public Accounts, Property Tax Assistance Division)
The productivity value of an acre of timberland equals the average annual net income a prudent manager could earn from growing timber over the five-year period preceding the appraisal's effective year, divided by a statutory capitalization rate. Net income has two parts: gross income and production cost.
Gross income is calculated by computing potential average annual timber growth per acre and multiplying this amount by timber's average annual market price for that year. This computation is performed for each year of the five-year period.
Average annual cost of producing timber in each of the five years is subtracted from gross income to find net income for the year.
Average annual net income is computed by averaging net income for each year of the five-year period. This five-year average annual net income is then divided by the statutory capitalization rate to produce the productivity value of timberland.
Timberland's productivity value is determined in ten basic steps: (NOTE: The following steps are completed by the assessor to determine taxable value)
1. classify timberland into three forest types;
Pine (and other softwood) timberland includes all forested areas in which the trees are predominately green throughout the year and do not lose their leaves. These trees are called evergreens. Forested areas where pine and other softwoods make up more than two-thirds of the trees free to grow are in this category.
Hardwood timberland includes all forested areas with a predominance of deciduous trees. These trees lose their leaves at the end of the frost-free season. Stands where hardwoods are more than two-thirds of the trees free to grow are in this category. Trees free to grow are those that are not covered by brush or other trees that prevent them from getting the sunlight necessary to grow.
Mixed timberland includes all forested areas where both evergreen and deciduous trees are growing and neither predominates. An area is classified as mixed when evergreen and deciduous trees each make up more than one-third of the trees.
2. classify timberland into four soil types;
The law requires chief appraisers to classify all timber-producing areas in their districts into four soil types. The chief appraiser should use data from the USDA Natural Resources Conservation Service (NRCS) soil surveys to develop soil type maps for his or her district. The NRCS does not publish soil type maps that the chief appraiser may use in appraising timberland.
The USDA Forest Service has defined these five site classes as follows:
• land capable of producing 120-165 (or more) cubic feet per acre per year;
• land capable of producing 85-120 cubic feet per acre per year;
• land capable of producing 50-85 cubic feet per acre per year; and
• land capable of producing less than 50 cubic feet per acre year
3. estimate average annual timber growth;
4. convert timber growth into units for estimating gross income;
5. estimate average annual timber prices;
A readily available source of stumpage price data is the Texas A&M Forest Service, located in College Station, Texas. The Texas A&M Forest Service is also an official source of data for timber appraisal. This agency collects timber prices in its bimonthly surveys of forest industries, consulting foresters, government agencies, and large landowners and publishes selected summaries of price data in its publication Texas Timber Price Trends. This publication reports selected price data for large and small pine and hardwood sawtimber sales, pine and hardwood pulpwood sales and other miscellaneous sales. Unpublished annual summaries of price data are available upon request.
The Texas A&M Forest Service reports both unweighted average annual prices and weighted average annual prices for various forest products for both northeast and southeast Texas. These price reports are available upon request from the Texas Forest Service. Chief appraisers should compute a simple average of these two reported prices and use this simple average in their timber appraisals.
6. estimate average annual potential gross income of timber growth;
The steps in this calculation are:
• Compute average annual gross income;
• calculate soil productivity multipliers; and
• Use soil productivity multipliers to adjust average annual gross income to potential gross income.
7. estimate average annual costs of producing timber;
Texas law defines timber production costs as reasonable management costs and other reasonable expenses directly attributable to producing timber that a prudent manager of the land and timber, seeking to maximize return, would incur in the management of the land and timber. The costs of producing timber are expenses related to establishing, owning, protecting, maintaining, and improving timber. These costs may vary by forest type, soil productivity, management intensity and other factors.
Timber production costs include professional services, site preparation, tree planting and seeding, timber improvement, protection against fire, insects and diseases, prescribed burning, maintenance of property boundaries, road construction and maintenance, measurements of standing timber, selling costs, property taxes, equipment use, mileage traveled to/from property for timber management, personnel supervision and administration. Since many foresters may include several activities under one general classification, chief appraisers should understand the components of a particular timber management activity to avoid duplicating or omitting costs.
8. estimate net income of timber growth;
To calculate the average annual net income per acre for each timber type and soil productivity class, the chief appraiser must subtract the average annual cost per acre from the average annual potential gross income per acre. This calculation must be performed for each forest type and soil productivity class. The results are the average annual net income per acre by forest type and soil productivity class.
9. capitalize net income by statutory rate to develop per acre timber values;
The productivity value of an acre of timberland is determined by dividing the average net income per acre for each forest type and productivity class by the capitalization rate. The capitalization rate to be used in determining the appraised value of qualified timber land is the interest rate specified by the Farm Credit Bank of Texas or its successor on December 31 of the preceding year plus 21/2 percentage points. (Texas Tax Code § 23.74)
10. apply timber values to timber acreage within the district.
The resulting appraised value may not exceed the market value of the land as determined by other appraisal methods.
Productivity values are then multiplied by the county rates and school districts in your area to determine tax liability.
The state of Texas does not have a severance or yield tax on timber or timber products.
The Comptroller's Manual for the Appraisal of Timberland: https://comptroller.texas.gov/taxes/property-tax/docs/96-357.pdf
The Comptroller's Guidelines for Qualification of Agricultural Land in Wildlife Management Use: https://comptroller.texas.gov/taxes/property-tax/docs/96-354.pdf
Texas A&M Forest Service, Instructions for Submitting Information or Evidence: https://tfsweb.tamu.edu/uploadedFiles/TFSMain/Manage_Forest_and_Land/Landowner_Assistance(6)/Taxation%20-%20Instructions%20for%20submiting%20evidence.pdf